A SENIOR hedge fund industry figure accused John Sunderland, the chairman of Cadbury Schweppes, yesterday of being factually incorrect in his attack on the industry last week.

Christopher Fawcett, the chairman of the Alternative Investment Management Association, gave a rare defence of the hedge fund industry, which he said had an image problem.

Mr Fawcett, a senior partner at the $4 billion (£2.1 billion) fund of Fauchier Partners, said that hedge funds provided liquidity to the market and bought out-of-favour stocks. “The market should be grateful for that. Hedge funds will be buying when nobody else does.”

He dismissed the suggestion by Mr Sunderland, who is also the president of the CBI, that there was price-fixing among hedge funds, with all charging a 2 per cent management fee plus 20 per cent of the profits.

“It looks a lot like retail price maintenance, which was abolished 40 years ago in my industry,” Mr Sunderland had said.

Mr Sunderland condemned hedge funds for their lack of transparency, short-term outlook, secrecy and excessive influence over investment banks.

But Mr Fawcett said that management charges ranged from 1 per cent to 3 per cent and the profits share from 15 to 30 per cent. Other terms were different too, and Mr Sunderland was “factually incorrect”.

Mr Fawcett said that hedge funds were no worse than private equity groups or big investment banks, which could also take a short-term view.

The image of hedge funds could definitely be better, he said, partly because they were not allowed to advertise and could market themselves only to sophisticated investors.

He also said that because hedge funds were large heavy-trading clients, they were treated well by investment banks, but said any impropriety would be a matter for regulators.

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